Correlation Between Dongwha Enterprise and LG Chemicals
Can any of the company-specific risk be diversified away by investing in both Dongwha Enterprise and LG Chemicals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dongwha Enterprise and LG Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongwha Enterprise CoLtd and LG Chemicals, you can compare the effects of market volatilities on Dongwha Enterprise and LG Chemicals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dongwha Enterprise with a short position of LG Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwha Enterprise and LG Chemicals.
Diversification Opportunities for Dongwha Enterprise and LG Chemicals
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dongwha and 051910 is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dongwha Enterprise CoLtd and LG Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Chemicals and Dongwha Enterprise is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dongwha Enterprise CoLtd are associated (or correlated) with LG Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Chemicals has no effect on the direction of Dongwha Enterprise i.e., Dongwha Enterprise and LG Chemicals go up and down completely randomly.
Pair Corralation between Dongwha Enterprise and LG Chemicals
Assuming the 90 days trading horizon Dongwha Enterprise CoLtd is expected to generate 1.61 times more return on investment than LG Chemicals. However, Dongwha Enterprise is 1.61 times more volatile than LG Chemicals. It trades about -0.03 of its potential returns per unit of risk. LG Chemicals is currently generating about -0.06 per unit of risk. If you would invest 2,280,000 in Dongwha Enterprise CoLtd on September 5, 2024 and sell it today you would lose (1,376,000) from holding Dongwha Enterprise CoLtd or give up 60.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.1% |
| Values | Daily Returns |
Dongwha Enterprise CoLtd vs. LG Chemicals
Performance |
| Timeline |
| Dongwha Enterprise CoLtd |
| LG Chemicals |
Dongwha Enterprise and LG Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwha Enterprise and LG Chemicals
The main advantage of trading using opposite Dongwha Enterprise and LG Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwha Enterprise position performs unexpectedly, LG Chemicals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in LG Chemicals will offset losses from the drop in LG Chemicals' long position.| Dongwha Enterprise vs. LG Chemicals | Dongwha Enterprise vs. Lotte Chemical Corp | Dongwha Enterprise vs. Hyundai Steel | Dongwha Enterprise vs. Dongkuk Steel Mill |
| LG Chemicals vs. Visang Education | LG Chemicals vs. LG Household Healthcare | LG Chemicals vs. Daishin Information Communications | LG Chemicals vs. Nice Information Telecommunication |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.
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